Why Netflix’s Price Hike Doesn’t Bother Me

First off, full disclosure: I’m a streaming-only Netflix customer, and I’ve never been a mail-order video disc guy. I’m too impatient. If I want it, I’ll just Redbox it. Or Blockbuster it. Or if it’s available through an official replay-mode online, simply watch it there, piping the video feed from my laptop to the HDMI port of my big-screen.

So when Netflix announced it was hiking the price of its per-month combo streaming and DVD rental fee from $10 to $16, I shrugged. That’s a trifling $6 a month more, or $72 annually for the privilege of unlimited online video-watching and to check out one video disc at a time. Blockbuster’s $5 fee for a single 7-day rental is nearly as much as the difference.

Some are touting Netflix’s shift as a 60% price increase, which it technically is, but that’s not exactly representative. Given the still incredibly low monthly fee, it’s a little like characterizing a two-quarter hike over a buck as “50% markup.” Sure, that’s accurate, but it sounds a lot worse than it might be were Netflix’s base monthly fee $100 (or $150 after markup) instead of just $10.

And let’s not overlook the fact that Netflix just reintroduced its original disc-only subscription plan for $8 a month. If you don’t care to stream videos (or simply can’t), now you’re able to rent DVDs for $2 less a month than you were paying before (less the streaming option).

So while I understand the backlash (to hear some in the press tell it, consumers are ubiquitous in their scorn), it’s hard for me to be miffed with Netflix. The service was underpriced from the get-go. $10 a month to watch unlimited (often high-definition) online movies and pull in upwards of a dozen snail mail movie discs each month? Compared to what we used to pay for brick-and-mortar DVD rentals?

The question, if we can see past the crazy net rage for just a moment, should be what’s a fair price for a service like Netflix’s. I’m all for putting the screws to companies that bilk customers, but is that really what Netflix is up to?

Techland editor Doug Aamoth compiled a list of Netflix alternatives this morning. There’s Blockbuster, which lets you rent one video disc at a time for $12 a month (but $4 more than Netflix). There’s Redbox, with its $1 per day fee—not bad at all, except you have to return the discs a day later, and if you watch more than eight shows a month, you’re back at Netflix pricing, plus out the travel time and gas to-from your nearest Redbox unit (that, and Redbox’s rental selection is trifling). There’s Hulu Plus, similarly priced at $8 a month for streaming-only, but, well, it’s streaming only, and the selection’s tiny, unless you’re into often obscure TV shows and films. There’s Amazon Prime Instant Video, but like Hulu Plus, the selection’s prohibitively limited, and unless you’re a Prime member ($79 a year) you’ll pay $2.99 for each two-day rental.

I have no dog in this fight, and I’ll switch to a more appealing service at the drop of a hat, but by my measure, Netflix—streaming-only, disc-only, or the combo rental plan—is still the best deal going.

Then there’s the conjecture about why Netflix really did this. How about: to show up content providers by making it clear who’s renting discs and who’s streaming?

That’s what Wedbush Morgan analyst Michael Pachter thinks. He admits it’s just speculation, but one of Netflix’s biggest cost increases has been what content providers charge to stream movies and TV shows. By making who does what even more explicit, Pachter surmises the company “may be able to successfully argue that a lesser number of subscribers access streaming content,” thus reducing growth in streaming content costs.

And therefore pass those savings on to us, in the form of not jacking the prices up further. Also: by adding tons more streaming content (and, eventually, making by-mail rentals obsolete). Because let’s face it: $16 a month for unlimited video streaming and single video disc checkout is still pretty much a steal. If you disagree, that’s your right, but making out like it’s a screw-job of epic proportions gets the issue out of proportion, and smacks of echo chambering to me.